The International Finance Corporation (IFC) estimates that the whole market for agricultural “productive use of energy” products in sub-Saharan Africa is worth $11.3 billion. A number of recent developments have heightened sector players’ interest in investigating and marketing such products.
Decentralised energy solutions, particularly solar household systems, have grown more standardised and recognised in the last decade and their use is now ubiquitous across the world.
Decentralised renewable energy is presently the most accessible, scalable and inexpensive alternative in many African countries’ electrification programmes. Electricity is only one, albeit critical, component of the decentralised revolution, and productive use of energy, or PUE, is slowly but steadily becoming a reality.
PUE generally refers to activities that produce money, boost productivity, increase diversity and create economic value by improving people’s quality of life by using energy for education, healthcare, internet access and other social services. It’s an ancient word that was used long before decentralised energy solutions became popular.
With the solar business growing in importance across Africa, a number of recent developments have heightened sector players’ interest in investigating and marketing PUE.
First, the growing number of individuals with high levels of electricity (Tier-2 and above, which means a total of more than 20W, 4 hours per day and 2 hours at night) has intensified the focus on converting energy access into new potential for revenue production and long-term socio-economic development in rural areas.
Another important issue is financial affordability, as pay-as-you-go (PAYGO) models and the expanding availability of mobile-money services, as well as technical innovation and lower solar-panel costs, all help to make PUE products more accessible to low-income users.
According to new research published by The Powering Renewable Energy Opportunities Programme (PREO), supported by the IKEA Foundation and UK aid, at least $1.2 trillion is required to facilitate investment in the acquisition and powering of productive use of energy (PUE) appliances and equipment in rural sub-Saharan Africa (SSA) over the next ten years.
PREO’s results equate to a $120 billion annual investment over the next ten years; $662.3 billion will be spent on PUE equipment and appliances, with the remaining $528.9 billion going towards solar photovoltaic (PV) energy systems to power the equipment and gadgets.
The agriculture value chain provides the greatest significant potential for PUE capital investment in Africa, accounting for 75% of rural economic activity. Water pumps, sun dryers, freezers, milling machines and oil presses are among the equipment and appliances found, accounting for 88% of the market opportunity value.
Agriculture is a key force in Africa, particularly in rural areas, where it is essential to many aspects of daily life. Local farming provides money and food for hundreds of millions of people in SSA, with more than 80% of rural residents employed in the industry.
Role of climate change
However, despite its importance, the region remains barren. Only 5% of Africa’s agricultural land is properly watered now, and climate change’s severe weather conditions are already doing havoc.
The International Finance Corporation (IFC) estimates that the whole market for agricultural PUE products in sub-Saharan Africa is worth $11.3 billion. Solar water pumps are expected to reach up to 1.6 million households in sub-Saharan Africa by 2025, and up to 2.8 million houses by 2030, according to the Efficiency for Access Coalition, resulting in a $1.6 billion investment.
Market expansion and general acceptance are determined by a customer’s capacity to pay for the items, which necessitates outside investment. PAYGO is frequently insufficient for smallholder farmers who only make money during harvesting season, necessitating more innovative solutions.
As a result, funds will be used to make solar panels and PUE solutions available to those who need them most, establishing inclusive, affordable financing schemes.